4.8.5.2
(10-01-2003)
Innocent
Spouse
Cases

4.8.5.2.1
(10-01-2003)
Case
Subject
to
Review

All
IRC
§
6013(e)
and
IRC
§
6015
innocent
spouse
cases
are
subject
to
streamlined
innocent
spouse
procedures
outlined
in
IRM
25.15.10.1.
Cases
worked
by
Revenue
Agents
and
Tax
Compliance
Officers
should
be
forwarded
to
TS
before
any
determination
letters/notices
are
issued
or
assessments/abatements
are
made
with
respect
to
the
innocent
spouse
issue,
regardless
of
how
the
issue
arose
or
the
determination
of
the
issue.

4.8.5.2.2
(10-01-2003)
Return
of
a
Case
to
the
Group

Reviewers
may
return
an
innocent
spouse
case
to
the
group
manager
for
reconsideration
of
technical
provisions
or
for
additional
factual
development.
The
case
may
also
be
returned
if
account
problems
have
not
been
resolved.
If
a
case
is
returned
to
the
group,
the
examiner
is
required
to
respond
within
30
days
of
receipt.

4.8.5.2.3
(10-01-2003)
Collection
Referral
Cases

Collection
referral
cases
are
reviewed
using
the
same
guidelines
and
standards
specified
for
the
area
TS
and
centralized
review.
The
Territory
Manager
may
delegate
TS
review
responsibility
to
a
revenue
agent
at
a
local
post
of
duty
to
expedite
treatment
of
Collection
referral
cases.

4.8.5.3
(10-01-2003)
Bankruptcy
Cases
—
General

A
bankruptcy
petition
filed
by
a
business,
joint
entity,
or
individual
generally
operates
as
an
automatic
stay
on
any
act
to
assess,
collect,
or
recover
tax
due
from
the
taxpayer.
TS
works
very
closely
with
Area
Counsel
and
Insolvency.

4.8.5.3.5
(10-01-2003)
Bankruptcy
Suspense
Procedures

Monthly,
a
listing
of
cases
in
bankruptcy
suspense
is
sent
to
Insolvency
or
the
reviewer
with
access
to
the
Automated
Insolvency
System
(AIS)
can
verify
cases
are
still
in
bankruptcy.
Reviewers
may
also
have
access
to
PACER
and
RACER
databases
within
their
respective
bankruptcy
court
districts.
Do
not
rely
on
the
absence
of
a
TC
521
to
determine
if
a
case
is
still
in
bankruptcy.

Cases
in
which
the
taxpayers
are
no
longer
in
bankruptcy
are
removed
from
suspense
and
closed.

4.8.5.3.6
(10-01-2003)
Assessment
Statutes

In
statutory
notice
cases,
IRC
§
6213
and
IRC
§
6503
prohibit
the
assessment
of
tax
until
the
expiration
of
the
period
allowing
the
taxpayer
to
file
a
petition
with
the
tax
court.
Bankruptcy
law
generally
prohibits
a
taxpayer
from
petitioning
the
Tax
Court
while
in
bankruptcy
status.
Therefore,
once
released
from
bankruptcy,
the
taxpayer
is
allowed
to
file
a
petition
with
the
tax
court
during
the
portion
of
the
90-day
statutory
period
that
was
denied
during
the
bankruptcy,
plus
an
additional
60
days.

4.8.5.3.7
(10-01-2003)
Closing
Cases
from
Bankruptcy
Suspense

The
statute
of
limitations
must
be
recalculated
taking
into
consideration
IRC
§
6213
and
IRC
§
6503,
as
noted
above.
The
new
statute
date
is
noted
on
Form
895,
Notice
of
Statute
Expiration,
prior
to
closing
the
case.

If
the
period
in
which
the
taxpayer
is
permitted
to
file
a
petition
with
the
Tax
Court
has
not
expired,
the
case
is
forwarded
to
the
90-Day
Unit
for
further
suspense.
Otherwise,
the
case
is
forwarded
for
assessment.

4.8.5.3.8
(10-01-2003)
Joint
Returns

When
a
bankruptcy
involves
a
joint
tax
return,
TS
determines
whether
one
or
both
spouses
filed
bankruptcy.

If
only
one
spouse
filed
bankruptcy:

the
statute
on
the
non-bankrupt
spouse
continues
to
toll,

the
case
file
is
forwarded
for
non-master
file
assessment
against
the
non-bankrupt
spouse,
and

the
case
is
returned
to
TS
after
assessment
for
processing
the
bankrupt
spouse
to
bankruptcy
suspense.

4.8.5.3.9
(10-01-2003)
References

Refer
to
IRM
4.27,
Bankruptcy.

Note:

This
IRM
is
to
be
renumbered
as
IRM
25.17.20
through
.24.

4.8.5.4
(10-01-2003)
TEFRA
Case
Reviews

After
completion
of
the
case
by
the
examiner,
the
TEFRA
key
case
is
closed
to
TS.

Ensure
at
least
120
days
pass
between
the
issuance
of
the
NBAP
to
the
last
identified
notice
investor
and
the
issuance
of
the
Final
Partnership
(S-Corporation)
Administrative
Adjustment
(FPAA
or
FSAA,
as
appropriate)
to
the
Tax
Matters
Person
(TMP),

Ensure
the
TMP
is
properly
designated
in
accordance
with
Treas.
Reg.
301.6231(a)(7)–1,
26
CFR
301.6231(a)(7)-1
and
Treas.
Reg.
301.6231(a)(7)-2,
26
CFR
301.6231(a)(7)-2
and
that
there
is
sufficient
documentation
in
the
key
TEFRA
case
file
verifying
the
validity
of
the
designation,

Ensure
the
Forms
886-Z(c)
are
dated
and
certified
by
the
Campus
TEFRA
Function
(CTF)
employee.
The
distributive
share
schedule
must
reflect
all
of
the
investors’
names
and
TINs.
Verify
that
individual
percentage
interests
total
100
percent.
Obtain
a
TSUMYP
as
a
check
with
the
Forms
886-Z(c)
or
if
Forms
886-Z(c)
have
not
been
generated
by
the
CTF,
and

Determine
if
the
Form
2848
is
properly
executed
if
case
if
unagreed.
If
not,
solicit
a
new
Form
2848
from
the
representative
and
explain
that
he/she
will
not
be
able
to
represent
the
taxpayer
in
Appeals
or
receive
notices
if
not
properly
executed.

4.8.5.4.3
(10-01-2003)
Agreed
TEFRA
Cases

4.8.5.4.4
(10-01-2003)
Unagreed
TEFRA
Cases:
60-Day
Letters

60-Day
letters
provide
the
TMP
with
a
copy
of
the
examination
results
for
distribution
to
the
investors,
invite
a
protest,
explain
the
taxpayer’s
appeal
rights,
and
offer
the
investors
another
opportunity
to
agree
to
the
TEFRA
issues.

60-Day
letters
will
be
issued
to
the
TMP
and
all
notice
partners
or
shareholders
that
did
not
agree
to
the
examination
issues
at
the
closing
conference.

A
60-Day
letter
package
will
be
prepared
and
submitted
to
the
campus
or
compliance
center
for
issuance,
following
the
guidelines
outline
in
IRM
4.31.1,
Flow
Through
Entity
Multifunctional
Handbook.

Response
to
the
60-Day
letter:

ACCEPTANCE
OF
SETTLEMENT
AGREEMENT
—
Procedures
outlined
in
IRM
4.31.1
are
to
be
followed.

PROTESTED
—
If
a
protest
is
filed,
a
review
will
be
conducted
as
outlined
in
IRM
4.31.1,
and
if
valid,
the
case
will
be
forwarded
to
Appeals.

DEFAULT
—
A
150-Day
letter
(FPAA/FSAA)
will
be
prepared
if
a
valid
protest
is
not
received
or
not
all
of
the
partners/shareholders
have
agreed
to
the
partnership
or
S-corporation
issues.

4.8.5.4.5
(10-01-2003)
FPAA/FSAA:
150-Day
Letters

If
a
TEFRA
entity
proceeding
is
not
resolved
at
the
examination
level,
a
Notice
of
Final
Partnership
Administrative
Adjustments
(FPAA)
or
Notice
of
Final
S
Corporation
Administrative
Adjustment
(FSAA)
will
be
issued.
FPAA/FSAAs
are
equivalent
to
statutory
notices
of
deficiency
and
should
be
prepared
in
a
similar
format.

150-Day
letters
are
issued
to
the
TMP
and
all
notice
investors
that
did
not
agree
to
the
examination
issues
at
the
closing
conference
or
when
the
60-Day
letter
was
issued.

A
150-Day
letter
package
will
be
prepared
and
processed
as
outlined
in
IRM
4.31.1,
Flow
Through
Entity
Multifunctional
Handbook.
If
there
are
fewer
than
45
days
remaining
on
the
statute,
then
the
TMP
and
investor
letters
should
be
mailed
by
the
local
office,
using
certified
mail.

4.8.5.5
(10-01-2003)
Fraud
Cases

Procedures
for
special
handling
of
civil
fraud
cases
are
outlined
in
IRM
25.1,
Fraud
Handbook.

4.8.5.5.1
(10-01-2003)
Scope
of
Review

All
aspects
of
fraud,
including
the
recognition
of
fraud
indicators,
factual
development,
case
file
documentation,
and
proper
completion
of
procedures
should
be
considered
when
reviewing
cases.

4.8.5.5.2
(10-01-2003)
Case
Return
Criteria

Cases
may
be
returned
to
the
examiner
for
further
development
or
correction
if
there
is
evidence
of
fraud,
malfeasance,
collusion,
concealment,
or
misrepresentation
by
the
taxpayer
or
representative
that
has
not
been
adequately
addressed
in
the
file.

4.8.5.5.3
(10-01-2003)
Cases
Subject
to
Joint
Investigation

A
case
that
has
been
the
subject
of
a
joint
investigation
and
for
which
prosecution
has
been
recommended
is
reviewed
using
the
quality
standards
outlined
in
IRM
Exhibit
4.8.3–1.

After
review
of
the
case,
the
file
is
prepared
for
suspense
pending
resolution
of
the
criminal
prosecution
action.

Copies
of
the
examiner’s
report
are
forwarded
to
Criminal
Investigation
by
the
Fraud
Referral
Specialist
(FRS).

The
administrative
file
should
be
assembled
and,
upon
request
of
the
Special
Agent
in
Charge
(SAC),
forwarded
to
Area
Counsel
(copies
of
returns
only).

At
a
minimum,
the
suspensed
file
should
include
the
following:

Documentation
that
criminal
action
is
pending,

Copy
of
the
examiner's
report,

Tax
returns
involved
in
the
case,

Form
2797,
Fraud
Referral,
and

Workpapers
of
sufficient
depth
to
support
the
proposed
civil
adjustments.

Protection
of
confidential
material
in
securely
locked
cabinets
during
the
suspense
period.

TS
has
responsibility
for
making
periodic
evaluations
of
the
case
to
determine
if
circumstances
have
changed
and
verify
that
the
Government’s
interests
are
adequately
protected.
See
IRM
4.8.2.10.6.

Upon
receipt
of
a
Criminal
Investigation
(CI)
memorandum
advising
TS
of
the
resolution
of
the
criminal
prosecution,
the
case
file
will
be
released
from
suspense
and
returned
to
the
examiner
for
civil
settlement.
Notice
of
cases
referred
to
the
Department
of
Justice
(DOJ)
prior
to
July
2000
will
be
by
Area
Counsel
memorandum.

4.8.5.6
(10-01-2003)
Grand
Jury
Cases

Criminal
Investigation
(CI
)
has
complete
jurisdiction
over
Grand
Jury
cases.
Once
a
request
has
been
approved,
the
CI
Director
of
Field
Operations
will
notify
TS
through
the
Fraud
Referral
Specialist
(FSR)
that
a
taxpayer
is
under
grand
jury
investigation.

The
TS
reviewer
determines
whether
the
taxpayer
is
under
examination.
If
an
examination
is
in
process,
the
reviewer
submits
a
written
request
to
the
group
for
the
case
to
be
submitted
for
suspense.

4.8.5.6.1
(10-01-2003)
Examiner
Responsibilities

Upon
notification
of
the
grand
jury
investigation,
the
examination
of
the
taxpayer
for
all
periods
involving
the
same
type
of
tax
must
be
suspended.
Before
proceeding
with
an
examination
involving
a
different
type
of
tax,
as
a
related
entity,
contact
CI
for
their
recommendation.

The
examiner
must
ensure
that
all
workpapers
and
documentation
contained
in
the
file
are
appropriately
dated,
initialed
and
indexed.
This
eliminates
any
doubt
as
to
the
origin
of
the
information
available
for
civil
use.

The
examiner
prepares
a
report
using
available
information
at
that
time.
The
examiner
then
forwards
the
report,
along
with
the
original
returns
and
administrative
file
to
TS.

4.8.5.6.2
(10-01-2003)
TS
Responsibilities

TS
verifies
the
statute
of
limitations
for
all
returns
contained
in
the
file.

The
reviewer
also
reviews
the
file
and
prepares
a
cover
sheet
submitting
the
case
for
grand
jury
suspense.

The
reviewer
coordinates
with
CI
on
all
imminent
statutes.
This
coordination
continues
throughout
the
period
the
case
is
in
suspense.

4.8.5.6.3
(10-01-2003)
Grand
Jury
Suspense

The
case
status
code
is
updated
to
status
36.

4.8.5.6.4
(10-01-2003)
Closing
Cases
from
Grand
Jury
Suspense

Upon
completion
of
the
grand
jury
proceedings,
CI
issues
a
memorandum
to
the
area
releasing
the
case
for
civil
disposition.

The
case
is
returned
to
the
group
to
resume
the
civil
examination.

4.8.5.6.5
(10-01-2003)
References

Refer
to
IRM
25.1,
Fraud,
for
a
complete
discussion
of
Grand
Jury
procedures.

4.8.5.7
(10-01-2003)
Cases
Returned
from
Appeals

Areas
have
the
authority
to
establish
local
procedures
to
control
cases
returned
from
Appeals.
In
the
absence
of
local
procedures,
the
following
procedures
in
(2)
below
are
suggested.

Appeals
may
return
cases
to
the
areas
for
further
development.
Cases
returned
to
Compliance
are
routed
to
TS
and
assigned
to
a
reviewer
for
consideration.
As
Appeals
does
not
use
ERCS,
the
case
may
be
updated
on
AIMS
to
status
20.

Note:

Appeals
may
update
AIMS
to
status
23
for
cases
returned
to
the
Campus
TEFRA/non-TEFRA
functions.
The
CTFs
will
update
the
cases
to
status
34
upon
receipt
of
the
database.

4.8.5.7.1
(10-01-2003)
Disagree
with
Appeals
Request

If
the
reviewer
does
not
agree
with
the
Appeals
recommendation
and
the
Technical
Services
Group
Manager
concurs,
a
responding
or
clarifying
memorandum
is
prepared
and
returned
to
Appeals
with
the
case
file.

4.8.5.7.2
(10-01-2003)
Agree
with
Appeals
Request

If
the
reviewer
agrees
with
the
Appeals
recommendations
and
the
Technical
Services
Group
Manager
concurs,
the
case
is
returned
to
the
examiner
for
completion
of
the
required
actions.

4.8.5.7.3
(10-01-2003)
Criteria
for
Returning
Cases

Cases
should
be
returned
to
the
group
if
the
matter
is
factual,
requires
further
development
or
verification
of
new
information,
and
it
is
more
efficient
and/or
expedient
for
the
examiner
to
complete
the
work.

Cases
should
not
be
returned
to
the
group
if
the
matter
is
one
of
legal
interpretation
and
is
not
a
matter
of
factual
development.

4.8.5.7.4
(10-01-2003)
Case
Return
and
Closing
Procedures

If
Appeals
released
jurisdiction
of
the
case,
AIMS
is
updated
and
the
case
is
returned
to
the
field.
Upon
completion
of
the
additional
field
work,
the
case
closes
either
by
using
normal
procedures
without
additional
action
by
TS
or
by
returning
to
TS
for
processing,
depending
upon
the
particular
case.

If
Appeals
did
not
release
jurisdiction,
the
case
is
returned
to
the
field.
Upon
completion
of
the
required
field
work,
the
case
closes
to
TS
for
transmittal
to
Appeals.

TS
monitors
and
follows-up
on
outstanding
cases
returned
to
the
field.

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